r ;.

STATE OF NORTH CAROLINA IN THI~ GENI~RAL COURT OF JUSTICE

,).SLJJ)EIUOR COURT DIVISION
COUNTY OF MECKLENBURG !, ,I
',' NO. lfltvD2/)C;y/
. l.:~},

NEW NGC, INC.,

Plaintiff,

v.
COMPLAINT FOR BREACH OF
ACE AMERICAN INSURANCE COMPANY,
CONTRACT AND DECLARATORY
AlVIERICAN GUARANTEE & LIABILITY
JUDGMENT JURY TIDAL
INSURANCE COMPANY, LIBERTY
DEMANDED
INSUIw'\fCE UNDERWRITERS INC., and
NATIONAL UNION FIRE INSURANCE
COMPANY Oli' PITTSBURGII,PA, ,

Defend~lllts.

Plaintiff, New NGC, Inc. ("NGC"), alleges as follows against Defendants ACE American

Insurance Company, American Guaranty & Liability Insurance Company, National Union File

Insurance Company of Pittsburgh, PA, and Liberty Insurance Underwriters, Inc. (collectively

"Insurers") in support of its action for breach of contract and declaratory judgment:

NATURE OF THE ACTION

1. NGC seeks contractual damages as well as a declaration, pursuant to N.C. Gen.

Stat. § 1-253, setting forth its right to recover and secure insurance proceeds from Insurers for

the costs of investigating, defending, and resolving clainls that have been and will be brought

against NGC alleging injuries and damage purportedly sustained as a resuItofexposure to

drywall manufactured and distributed by NGC (the "Drywall Products"). Defendants are

insurance companies that issued general liability insurance policies to NGC that'covcr NGC's

liabilities arising from the Drywall Products.

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 2. NGC seeks a declaration that Insurers are obligated to pay the costs and expenses

of investigating, defending and resolving claims against NGC arising from the Drywall Products,

including lawsuits that have been or will be asserted against NGC (the "Drywall Claims"). The

Drywall Claims seek damages fi-om NGC because of alleged bodily injury, personal il~ury,

property or other damage (or a combination thereof), and allege causes of action that include,

without limitation, negligence, strict liability, and product liability. The Drywall Claimants'

asserted injuries are alleged to have arisen ii-om exposure to the Drywall Products, which were

allegedly manufactured, sold, used or distributed by NGC Ul the course of its business operations

in Mec1denburg County, North Carolina and elsewhere. The Drywall Products are alleged to

have caused property damage in the form of, inter alia, the corrosion of metal pipes and

electrical wiring, deterioration of air conditioning coils, and melting of insulation, as well as

bodily injury in the form ofrespu'atory ailments and allergy-like symptoms. The injuries alleged

in the Drywall Claims are alleged to have taken place during the Insurers' policy periods, thereby

triggering the Insurers' obligations under all such insurance policies.

3. NGC also seeks a declaration that the Insurers are jointly and severally obligated,

pursuant to the tenl1S of their insurance contracts, to defend NGC against the Drywall Claims and

indemnify it against liability, including tlu'ough payment of settlements and judgments, resulting

therefrom.

4. NGC has incuned, and will continue to incur, expenses ill investigating and

defendulg itself against the Drywall Claims. Additionally, N GC may incur costs to resolve the

Drywall Claims in the future, by way of settlement or judgment. NGC contends that these

expenses are covered in full by one or more of the liability policies issued or subscribed by

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 Insurers. NGC reasonably believes, and thus alleges, that additional Drywall Claims, including

lawsuits, will be asserted against it in the futme.

5. On information and be1ief~ NGC asserts that each Insmer either has denied, or

will deny, coverage for each of the Drywall Claims. There is, accordingly, an actual and

justiciable controversy between NGC and the Insurers as to the availability of insurance

coverage for the Drywall Claims.

PARTIE~

6. NGC is a Delaware corporation, with its principal place of business in Charlotte,

North Carolina. From its Charlotte hcadquarters, NGC operates a fully integrated building

products manufacturing business. NGC is one of the leading wallboard l11allUfilcturers in the

United States. All wallboard sold and distributed by NGC is manufactured in the United States.

NGC owns and operates two wallboard manufacturing plants in NOlih Carolina.

7. Defendant ACE American Insurance Company ("ACE") is a Pell11Sylvania

corporation, with its principal place of business in Pennsylvania. At all relevant times, ACE was

authorized al1d licensed to do, and was doing, business in North Carolina.

8. Defendant American Guaranty & Liability Insurance Company ("American") is a

New York corporation, with its principal place of business in Il1inois. At all relevant times,

American was authorized and licensed to do, and was doing, business in North Carolina.

9. Defendant Liberty Insurance Underwriters Inc. ("Liberty") is a Massachuset1s

corporation, with its principal place of business in New York. At all relevant times, Liberty was

authorized and licensed to do, and was doing, business in North Carolina.

10. Defendant National Union Fire Insurance Company of Pittsburgh, PA ("National

Union") is a Pem1sylvania corporation with its principal place of business in New York. At all

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 relevant times, National Union was authorized and licensed to do, and was doing, business in

North Carolina.

NGe's Insurance Coverage

11. ACE issued at least the following insurance policies covering NOC for the

Drywall Claims:
~-~.- -----~.--~-.---

Policy Number' Policy l)eriod Type ..-

0216 94770 11/1/2003 - 111112004 Primary
0217 08227 -¥.-
111112004 - 111112005 ---~---
--_._-
Primary
0205 87623 111112005 .- 1111/2006 Primary --
I-IDO 021733027 -------- -.-----
111112006 - 111112007 Primary
HDO 023735131 1111/2007 - 111112008 jl!lEQ§i~)r ____
HDO -023746773 111112008 - 111112009 ~rilllaly
0237 89504
"_.. _ - - - - - - - - - - - - -
111112006 - 111112007 Excess
0238 .87423 -
11/112007 - 1111/2008 Excess
0246 38170 11/1/2008·-- 1111/2009 --~-
Excess

12. National Union issued at least the following insurance policies covering NOC for

the Drywall Claims:

, - - - - - - - - ..
Policy ~~ri~!:1_ Type
.. -

BE297783
BE2978279
Policy Number .. _.- .. 1-'
111112003 - 11/112004 - -
111112004 - 111112005
Umbrella
Umbrella
--=1
'BE4484996 111112005 - 111112006 Umbrella
--- -----~-~--~.-

4485755 111112006 - 111112007 Umbrella

-_9835294
.. _--- - --.- .. 111112007 -- 111112008 - Umbrella
2227033 ._- 1111/2008 - 11/1/2009 Umbrella
- - --- --

13. American issued at least the following insmance policies covering NGC for the

Drywall Claims:
--_. __ .__ ._--- " _ 0 ••• _ _ -

PoU cy Numbe,r Policy l)eriod Type

0-04
AEC356834_._-_. 111112003 - 111112004 Excess
AEC356834 0-05 111112004 - 11/112005 Excess ------,----"--.
AEC356834 0-06 111112005 -- 111112006 Excess

14. Liberty issued at least the following insurance policies covering NGC for the

Drywall Claims:

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 15. NGC also contends that Insurers are aware ofthe liability policies issued to the

NGC, have copies of all liability policies issued to NGC that provide coverage for the Drywall

Claims and are aware of the terms and conditions thereof.

16. NGC has satisfied, shall be deemed to have satislled, or has been or shall be

relieved from satisfying, by operation of law or by virtue of Insurers' conduct, all terms and

conditions of Insurers' insurance policies, and is entitled to the full benefit of its insurance.

FACTUAL ALLEGATIQNfl.
The Dtywall Claims

17. The Drywall Claims generally a<;sert that NGC is responsible for damages arising

from bodily injury, personal injury, property or other damage (or combination thereof) allegedly

caused by exposure to Drywall Products or products or materials allegedly manufactured, sold,

used or distributed by NGC in the course of its business in North Carolina and elsewhere.

18. Certain claimants have filed a proposed class action lawsuit in the United States

District Court for the District of Arizona styled Yee v. National Gypsum Co. et at., Case No.

3:09-cv-08189. The Yee claimants allege that they have suffered bodily injury, personal injury,

propeliy and other damage from alleged exposure to Drywall Products allegedly manufactured,

sold, used or distributed by NGC. According to the fee claimants, NGC's allegedly "defective

Drywall causes adverse health consequences such as respiratory problems, sinus problems, eye

irritation and nosebleeds." Further, the Yee complaint alleges that NGC's product is defective

because it contains "compounds [thatJ damage, among other things, air conditioners,

refl-igerators, copper piping, silver, brass and chrome. The compounds blacken the

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 aforementioned items and literally cat away at the metals to the point that they degrade and can

crack or break." The Yee complaint also alleges that, "[n]early every appliance in a house is

susceptible to damage, in addition to the air conditioning, plumping and heating systems. It is

unclear at this time the extent 10 which the Drywall causes additional damage to homes."

19. NGC has been notified of a number of claims relating to homes in various other

states, including North Carolina, Florida, Louisiana, Massachusetts, and Wisconsin, allegedly

containing NGC drywall products. These claimants allege that NGC's drywall has caused

properiy damage to the homes and/or bodily il~ury to one or marc occupants of the homes.

20. In addition to the foregoing Drywall Claims identified above, NClC reasonably

anticipates that additional Drywall Claims will be asserted against it in the near future. By this

Complaint, NGC seeks a determination of the Insurers' obligation to cover such claims as they

arise. Accordingly, NGC's allegations regarding Drywall Claims include, and shall be deemed

to include, any and all suits, denumds and actions seeking damages, whether now or hereafter

brought against NGC during the pendency of this suit, as the result of personal injury, including

bodily injury, property or other damages allegedly caused by exposme to Drywall Products and

similar materials allegedly manuf~lctured, sold, used or distributed by NGC.

The Insurance Policies Issued to NGC Provide Coverage,j(Jr the Dlywall Claims

21. All of the presently Imown Drywall Claims have been timely tendered by NGC to

the Insurers for acknowledgement of their respective insuring obligations. NGC has complied

with all of its material obligations under the insurance policies alleged above.

22. On information and belief, all of the Insurers either have denied, or will deny,

coverage for the Drywall Claims.

23. The presently known insurance policies issued by Insurers provide insurance

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 coverage for sums, including amounts paid in settlement, which NGC becomes legally obligated

to pay as damages because of, among other things, bodily injury, personal injury, or other

damage. Insurers also have an obligation to investigate, defend, and pay NGC's defense and

investigation costs in connection with the Drywall Claims, pursuant to provisions contained in

Insurers' policies imposing a duty to investigate and defend or to payor reimburse investigation

and defense costs.

24. As a result of the allegations asselied in the Drywall Claims and the damages

sought therein, the costs of the investigation and defense of the Drywall Claims are covered by

the insurance polices jointly and severally issued by Insurers, and do not come within any

exception to or exclusion from insurance coverage.

25. To date, NGC has incurred costs investigating and defending against the Drywall

Claims. Such costs are continuing. NGC's losses arising from the Drywall Claims exceed

$10,000 and are covered by the insurance provided by Insurers.

FIRST CLAIM FOR RELIEF

(Breach of Contract against ACE and National Union)

26. NGC incorporates paragraphs 1 through 25, as if set forth in full.

27. NGC has timely tendered the presently known Drywall Claims to defendants,

including ACE and National Union, and has otherwise fully complied with its obligations under

the insurance policies issued by these defendants.

28. Under the terms of the insurance policies it issued to NGC, ACE has a contractual

duty to investigate and defend the Drywall Claims or otherwise reimburse NGC for the costs

NGC has incurred in investigating and defending the Drywall Claims.

29. ACE has denied coverage for the Drywall Claims.

30. Under the terms of the insurance policies it issued to NGC, National Union has a

C-l1S9865v2 11947.01010
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 contractual duty to investigate and defend the Drywall Claims or otherwise reimburse NGC i()r

the costs NGC has incurred in investigating and defending the Drywall Claims where, as here,

ACE has disclaimed coverage.

31. On information and belief, National Union has denied coverage for the Drywall

Claims.

32. ACE and National Union have breached the term of one or more of the policies

they issued to NGC by failing and refusing to pay for the investigation and defense costs that

NGC has incurred in connection with the Drywall Claims.

33. As a direct and proximate result of ACE's and National Union's breachcs of

contract, NGC has suffered and will continue to suffer damage in connection in the amounts

NGC has paid or incurred for investigation and defense fees and costs.

SECOND CLAIM FOR RELIEF

(Declaratory Relief against all Defendants)

34. NGC incorporates paragraphs 1 through 25, as if set forth in full.

35. NGC seeks a declaratory judgment that Insurers are obligated, under their

insurance policies and applicable law, to investigate, defend, reimburse and indenmify NGC

completely against the costs of past, current and future Drywall Claims. Insmers, however, have

failed to honor their insurance policies and have asserted inappropriate positions on coverage in

an effort to avoid their contractual obligations.

36. The Insurers have taken or will take the position that certain policy provisions

operate to limit or eliminate coverage, including:

a. The Insurers contend Of will contend that coverage is unavailable on the

grounds that bodily injury and property damage alleged in the Drywall Claims does not

constitute an "occulTence" as that term is used in their insurance policies.

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 b. The fnsurers contend or will contend that coverage is unavailable on the

grounds that bodily injury and property damage alleged in thc Drywall Claims did not occur

during the Insurers' policy periods.

c. The Insurers contend or will contend that coverage is unavailable on the

grounds that bodily injury and property damage alleged in the Drywall Claims is excluded as a

result of the "owned product" provisions of their insurance policies.

d. The Insurers contend or will contend that coverage is unavailable on the

grounds that bodily injury and property damage alleged in the Drywall Claims is excluded as a

result of the "your work" provisions of their insurance policies.

e. The Illsurers contend or will contend that coverage is unavailable on the

grounds that bodily injury and property damage alleged in the Drywall Claims is excluded as a

result of the "impaired property" provisions of their insurance policies.

f. The Insurers contend or will contend that coverage is unavailable on the

grounds that bodily injury and property damage alleged in the Drywall Claims is excluded as a

result of the so-called "pollution" provisions of their insurance policies.

g. The Insurers contend or will contend that coverage is unavailable on the

grounds that bodily injury and property damage alleged in the Drywall Claims is excluded as a

result of the so-called "expected or intended" provisions of their insurance policies.

h. The Insurers contend or will contend that coverage is unavailable on the

grounds that bodily il~jury and property damage alleged in the Drywall Claims is excluded as a

result of the "contractual liability" provisions of their insurance policies.

37. Insurers dispute, or on lllformation and belief will dispute, the rehefthat NGC

asserts is available under its insurance contracts. NGC, on the other hand, contends that the

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Case 3:10-cv-00022-RLV-DSC Document 1-1 Filed 01/20/10 Page 15 of 18

 Drywall Claims are covered for defense and indemnity under the Insurers' policies and that none

of the policy provisions raised by Insurers to limit or eliminate coverage arc applicable.

Accordingly, an actual and justiciable controversy presently exists between NGC and the

Insurers with respect to the Insurers' obligations to provide coverage for the Drywall Claims

under their policies.

38. A judicial declaration is necessary and appropriate at this time, and under the

circumstances alleged above, so that NGC may ascertain its rights under the policies. Such a

declaration is particularly appropriate under these circumstances in that the claimants in the

Drywall Claims seek to recover sums against NGC based on claims that implicate all of the

Insurers' policies. Ajudicial declaration ofNGC's rights under Insurers' policies also will

obviate seriatim litigation and a multiplicity of actions that would otherwise result from the

actual and justiciable controversy between NGC and Insurers concerning their respective rights

and obligations under the policies.

39. Accordingly, pursuant to N.C. Gen. Stat. § 1-253, NGC respectfully requests this

Court to declare the rights and legal obligations ofNGC, and determine and declm-e that Insurers

are jointly and severally obligated to pay in full NGC' s legal liabilities, costs and expenses for

the investigation and defense of the Drywall Claims, including without limitation, all sums paid

in settlement and reimbursement for the defense and investigation of the Drywall Claims.

WB.EREFORE, NGC respectfully seeb; a jUdgment by this Court as follows:

1. On the First Claim for Relief: damages for breach of contract in an amount to be

determined at trial;

2. On the Second Claim for Relief: pursuant to N.C. Gen. Stat. § 1-253, that

C-1I59865v211947.0]OJO
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Case 3:10-cv-00022-RLV-DSC Document 1-1 Filed 01/20/10 Page 16 of 18

 this Court declare the rights and legal obligations ofNGC, and determine and declare that

Insurers are jointly and severally obligated to pay in full NGC's legal liabilities, costs and

expenses for the investigation and defense of the Drywall Claims, including without limitation,

all sums paid in settlement and reimbursement for the defense and investigation of the Drywall

Claims, and that the COUli further declare:

a. The bodily injury and property damage alleged in the Drywall Claims

constitutes an "occurrence" as that term is used in the Insurers' policies.

b. The bodily injury and property damage alleged in the Drywall Claims

occurred, in whole or in part, during the Insurers' policy periods.

c. The "owned product" provisions of the Insurers' policies do noi limit

coverage for the Drywall Claims.

d. The "your work" provisions of the Insurers' policies do not limit coverage

lor the Drywall Claims.

e. The "impaired property" provisions of the Insurers' policies clo not limit

coverage for the Drywall Claims.

f. The "pollution" provisions of the Insurers' policies clo not limit coverage

for the Drywall Claims.

g. The "expected or intended" provisions of the Insurers' policies do not

limit coverage for the Drywall Claims.

h. The "contractual liability" provisions of the Insurers' policies do not limit

coverage for the Dry\vall Claims;

3. For costs of suit herein; and

4. For such other and further relief as is just and proper.

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 JUR Y TRIAL DEMAt~J~

In accordance with North Carolina Civil Rule 38, NGC hereby demands trial by jury of

any and all issues so triable.

Dated: December 16, 2009

R. Steven D Ge rge .C. Bar No. 20723)

ROBINSO ,B D HAW & HINSON, P.A.
101 North 'ryo -SJeet, Suite 1900
Charlotte, .. or I 1 6~olina 28246
Telephone 4.377.8380
Facsimile: 704.373.3980
sdegeorge@rbh.com

Michel Y. Horton (pro hac vice pending)

David S. Cox (pro hac vice pending)
Jennifer M. Kennedy (pro hac vice pending)
MORGAN, LEWIS & BOCKIUS LLP
300 South Grand Avenue
Twenty-Second Floor
Los Angeles, CA 90071-3132
Telephone: 213.612.2500
Facsimile: 213.612.2501

Paul A. Zevnik (pro hac vice pending)

Janice L. Kopec (N.C. Bar No. 32787)
MORGAN, LEWIS & BOCKTUS LLP
] 111 Pemlsylvania Avenue, NW
Washington, DC 20004
Telephone: 202.739.3000
Facsimile: 202.739.4755

Attorneys for Plaintiff

New NGC, Inc.

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